Unusually, the global steel market is diverging in the opposite direction from “normal.”
Historically, China would show signs of strength driven by robust construction activity while Europe and the U.S. struggled, facing more mature markets and relatively higher levels of foreign penetration.
The U.S. continues to power ahead. There, mill lead times remain stubbornly protracted.
Meanwhile, China is showing all kinds of uncertainty — much of it self-inflicted.
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China’s emissions efforts
Although much was made of China’s ambitions to reduce emissions over the coming decade, after an initial flurry of anxiety the industry settled back to assume changes would be eased in gradually.
Indeed, Beijing even sought to play down the rate at which changes would be imposed following a sudden spike in prices as expectations of steel shortages took hold.
But over the last couple of weeks, it is becoming clear that cutbacks are happening. Output in the second half of the year is expected to be considerably less than the record first half.
Iron ore has taken a cue from both the message and the reality of cooling demand. Prices for 62% iron ore has dropped from the low 1,500s RMB/metric ton in early July to the mid-1,100s today on the Dalian exchange.